Forum

A good week for global governance

East Asia Forum - 18 hours 54 min ago

Authors: Alan S Alexandroff, University of Toronto, and Yves Tiberghien, UBC

For global governance watchers, this was the big week of the year. Between 7 November and 16 November, the world witnessed an APEC meeting in Yanqi Lake near Beijing complete with a bilateral China–Japan ‘breakthrough’ and a major US–China climate deal; an historic ASEAN and East Asia Summit held in Naypidaw, Myanmar; and a colourful G20 meeting in Brisbane, Australia.

Notwithstanding the chorus of those announcing growing disorder, global order seems better off after these summits.

The IMF, in its recent World Economic Outlook, points out that the world economy is in a difficult stage: global growth is slowing, trade protectionism remains a problem, inequality is rising and eroding support for globalisation, and environmental challenges appear to be rising faster than the global system appears to have the capacity to cope.

Many pundits predicted a weak post-midterm election period for Obama, tense relations between the West and Russia, uncertainties about a possible handshake between Chinese President Xi Jinping and Japanese Prime Minister Shinzo Abe, and weak institutional outcomes. Against expectations, the series of summits taking place over the last week and culminating with the G20 Leaders’ Summit in Brisbane made a material difference and advanced global governance.

The summits allowed leaders of key countries to arrest the slide toward conflict and zero-sum games, giving them a platform for mutually beneficial cooperation. This could be seen in the surprisingly positive US–China summit in Beijing, which may have given impetus for the modest US–India WTO breakthrough in Naypidaw, in turn setting the stage for a stronger final G20 declaration than expected.

And despite competition between the US and China on various fronts (such as trade, development, and global institutions), there were healthy signs on global economic architecture. There was reaffirmation of support for a pan-Pacific free trade effort (FTAAP at APEC and RCEP at EAS) and progress on global tax cooperation. More surprisingly, there was progress on anti-corruption efforts. Overall this means progress in strengthening global institutional architecture and a modest increase in trust for the global economy.

It is also clear that the two players that dominated the global game throughout the sequence were China and the US. Both played stronger cards than expected. They jointly produced the biggest surprise of the week, namely the four main bilateral agreements announced on 12 November. In addition to the climate deal with potential catalytic impact, the two countries reached agreements on IT trade going back to the WTO’s Information Technology Agreement, the strengthening of military-to-military contacts, and a reciprocal visa deal with 10-year visas for businesspeople and students.

By contrast, the voices from Europe, Japan, Russia, and India sounded weaker. It is fascinating to contrast the more multipolar situation in the London G20 in 2009 to the more ‘G2-like’ world of 2014. Likewise, the voice of middle powers such as Australia, Canada, and South Korea also seemed weaker at this summit. Australia as Chair fought against the US (and EU interests) on climate change and lost. It fought against the BRICS on Russia’s participation and also lost.

What of the tricky points?

Although word had been that Chinese opposition would preclude agreement on an anti-corruption strategy, in fact the Chinese opposition faded. And as a result the G20 has ratified a 2015–16 G20 Anti-Corruption Action Plan. Importantly in the Plan there is a call for countries to share information about trusts and shell companies used in tax evasion and money laundering.

In addition, the G20 took further steps to deal with tax avoidance. Though not a surprise, the efforts to advance the Base Erosion and Profit Shifting (BEPS) agenda appear to remain front and centre of G20 action. G20 leaders affirmed the principle of taxing profits in the country where value (and hence profit) is created. They also committed to finalising the BEPS Action Plan in 2015.

One surprise was the rather pointed statement on the failure to implement IMF quota reform. If the reform is not passed by the end of the year — that is, if the US Congress fails to pass the legislation to provide for a capital increase — the G20 declared that it would ask the IMF to prepare other options.

The US–China summit and the final G20 declaration with associated pledges for the Climate Green Fund (especially by the US and Japan) generated surprisingly positive momentum on the climate front. This was a strong statement — especially given Australian opposition — urging announcements on G20 countries’ nationally determined contributions to CO2 reductions in advance of the UN Climate Change Conference in Paris next year.

The bottom line on Australian efforts as Chair is that even though the government’s rhetoric far too often appeared better suited for an Australian election than a global summit, the Australians can be pleased that a number of initiatives made significant progress. There was consistent effort to advance the macroeconomic and financial reform agendas. Still, the APEC meeting was where the big agreements were announced.

All of this reveals a combination of advancement in global institutions and competition between the US and China. On the whole, the US and China both won and the global public good benefited as well. Competition between China and the US continues, not surprisingly, but the week showed that the major powers could advance collaboration even while remaining competitors, especially in the Asia region.

All in all it was a good week for global summitry, and good week for US and Chinese leadership too.

Alan S Alexandroff is Director of the Global Summitry Project at the Munk School of Global Affairs, University of Toronto.

 Yves Tiberghien is Associate Professor of Political Science and Director of the Institute of Asian Research at the University of British Columbia

 A longer version of this article first appeared here, at Global Summitry Project

 

Categories: Forum

Where are Hong Kong’s moderate democrats?

East Asia Forum - Fri, 11/21/2014 - 16:00

Author: Steven Yet, University of Toronto

After weeks of protests, the protracted stalemate in Hong Kong doesn’t appear to be over. While the Occupy Central movement has brought together civil society groups to protest for democratic change, the movement lacks active participation from the political side. Progress cannot be made unless the Occupy Central movement engages with the political community.

Any real progress needs the active collaboration of both political society and civil society. While civil society is able to launch large-scale protests — as seen in the Occupy Central movement’s ability to draw large crowds when it began its civil disobedience campaign in September — it lacks the organisation to push for progressive political reform, a role which should be taken up by political society, which has the power to influence the Legislative Council.

The political compromise between Beijing and Hong Kong democrats in 2010, though not comprehensive, was a notable moment in the history of Hong Kong democratisation. While acknowledging that any electoral reform must be in accordance with the Basic Law, both sides agreed on the proposal that the franchise of the five new special interest Functional Constituency seats be expanded to include all voters who were not eligible to cast a ballot in any functional constituency — a move that would render these seats popularly elected in all but name.

Why has this kind of real bargaining in the form of incremental democratisation now given way to confrontational tactics and radicalisation? The decline of moderate democrats is the key.

The political compromise in 2010 led to internal strife in the pro-democracy camp. The ‘moderate democrats’ within the Democratic Party moved away from the ‘radical democrats’, who were anxious at the prospect of a long wait for full democracy and opted for more drastic action. In a move to separate themselves from the radicals, the moderate democrats established the Alliance for Universal Suffrage, now called the Alliance for True Democracy.

The story was not over. The results of the 2012 legislative council election reflect a noticeable change in Hong Kong’s democracy movement. The political landscape has changed significantly since the 2012 elections. The Democratic Party was blamed for having “sold out” the pro-democracy camp in 2010 and suffered a catastrophic defeat, losing the position of leader of pan-democrats for the first time. In terms of seats, it dropped from eight to six. The loss was reflected more accurately in vote shares, with a 7 per cent fall compared with the 2008 election. In contrast, radical democrats from the People’s Power Party, the League of Social Democrats and the Neo Democrats gained three more seats, bringing their total to five seats in the Legislative Council. The radical wing, in particular, collected more than 15 per cent of the vote in the direct elections, surpassing the Democratic Party’s share.

The fall of moderate democrats in the Legislative Council, along with protests that forced the authorities to back down on the issue of national education in 2012, emboldened the radical wing of the pro-democratic movement.

The fact that civil society activists want to distance themselves from moderate democrats is not a healthy sign. The political impasse is due less to lagging public support than to a lack of mutual trust between Beijing authorities and democratic forces in Hong Kong. The moderate democrats are unable to mediate between Beijing and civil society activists, and any radical attempts only make the distrust between Beijing and the democratic forces in Hong Kong worse and reform less likely.

The current protests are led by civil society groups, including Occupy Central leaders, the Hong Kong Federation of Students, and Scholarism, rather than by moderate democrats in the Legislative Council. Civil society groups and the moderate democrats now need to work together in hopes of winning maximal concessions from Beijing. Civil society cannot achieve substantial progress on its own. If civil society and moderate democrats find a way to work collaboratively, both sides will have a better chance of achieving real progress.

Steven Yet is a doctoral student in the Department of Political Science at the University of Toronto. He is also an associate member at the Center for Civil Society Studies at the Chinese University of Hong Kong.

Categories: Forum

Why the AIIB presents an opportunity for New Zealand

East Asia Forum - Fri, 11/21/2014 - 04:00

Authors: Cassandra Shih, Victoria University of Wellington, and Benedict Xu-Holland, ANU.

So far 20 countries have taken up China’s open invitation to found the Asian Infrastructure Investment Bank (AIIB). Notably absent at the signing were Australia, Indonesia and South Korea, who did not definitively respond to the invitation. Until a week before the signing it seemed likely that Australia would join, but it eventually withdrew, citing ongoing transparency concerns similar to those voiced by US officials. The US likely sees the new bank as a threat to the US and Japan’s status as the regional norm-shapers of development finance.

The AIIB presents an opportunity for New Zealand to amplify its impact in the region. Though not a member of the AIIB, New Zealand is in a prime position to help manage future Pacific projects that attract AIIB backing. New Zealand’s small size and relative lack of geopolitical alignment allow it to pursue partnerships with both the US and China, while experience working in the Pacific makes its input on projects valuable.

At its core, the establishment of the AIIB is a product of China’s dissatisfaction with existing US-dominated development finance institutions. China’s share of the vote in the Asian Development Bank (6.47 per cent) and the World Bank (5.17 per cent) does not reflect its economic power. Current levels of lending by the ADB and the World Bank fall far short of meeting the region’s acute demand for infrastructure investment. Loans from these institutions are also burdened by extensive transparency and good governance requirements.

China, on the other hand, has an interest in promoting a set of development norms based on political non-interference. China also stands to gain favour with its neighbours if its investment model can successfully spur regional development.

China has made large commitments to the New Development Bank (NDB) and the AIIB. So far China has taken responsibility for supplying around 40 per cent of the NDB’s US$100 billion contingency fund, more than twice the amount put forward by the other members, and half the AIIB’s initial US$100 billion capital fund.

The suspicion with which some view China’s expansion into multilateral development finance is unwarranted. While Beijing is attempting to increase China’s influence in the Asia Pacific, its actions amount to economic and political common sense. China has previously been criticised for being a passive power and demonstrating lacklustre leadership on international issues. Its significant capital reserves must be mobilised if the region’s infrastructure needs are to be met.

China wants to increase regional prosperity, boost its global leadership credentials, procure financial wins for Chinese state-owned enterprises and secure votes in organisations like the UN. China therefore has strong incentives to act as a responsible power.

Until recently, China has been averse to pooling its aid money with others for fear of losing autonomy. In 2012 it turned down an invitation from Australia to join the Cairns Compact to promote transparency in aid flows in the Pacific. A senior Chinese delegate Wang Yongqiu said, ‘We have different approaches and practices from Western developed countries. We feel it is unnecessary to accept this multilateral coordination mechanism, but we need time to study it’.

Now that China has established multilateral coordination mechanisms of its own, New Zealand should seek ways to contribute to the AIIB’s success, at least where the Pacific is concerned. The lack of involvement by other Western countries in the AIIB should not deter New Zealand. Indeed, New Zealand has a track record of firsts when it comes to China. New Zealand was the first developed country to sign a free trade agreement with China in 2008. It was also the first developed country to announce a trilateral development project with China in the Asia Pacific, with a NZ$50 million (US$38.5 million) project to improve water quality in the Cook Islands in 2012.

Of course, successful collaboration depends on clear-eyed risk assessment. Internationally, New Zealand has an iconic brand built around its reputation as a fair, independent, green and safe country. Threats to this brand are taken very seriously, with the memory of the 2008 Sanlu milk scandal still raw in the New Zealand political and business psyche. New Zealand must therefore be selective in the projects it chooses to become involved in.

Another risk for New Zealand is whether China–New Zealand development cooperation might inadvertently cool New Zealand’s recently strengthened security relationship with the US. In 2010, the Wellington Declaration was signed, symbolically patching the rift caused in 1984 by New Zealand’s anti-nuclear policy. Following the signing, the former US secretary of state, Hillary Clinton, described the US–New Zealand relationship as ‘stronger and more productive than it has been in 25 years’. Ironically, US appetite to re-engage with its traditional allies in the region is partly motivated by a desire to reinforce its sphere of influence in the face of a rising China.

Whether it is worth stepping back from this progress with the US to pursue opportunities created by the AIIB will depend on how willing New Zealand is to use the full policy space available and engage independently with its partners.

A successful New Zealand foreign policy depends on working with all significant powers in the Asia Pacific. A reliance on the economic goodwill of China and on informal security relations with its traditional partners means that New Zealand must walk a tightrope between the two. Remaining flexible and agile will be key to ensuring that New Zealand benefits from a rising China, while being able to advance Pacific development and the credibility of its independent brand.

Cassandra Shih is a recent graduate from the Victoria University of Wellington.

Benedict Xu-Holland is a student and Education Officer at the College of Arts and Social Sciences, the Australian National University.

Categories: Forum

Political Islam in Bangladeshi democracy

East Asia Forum - Thu, 11/20/2014 - 16:00

Author: Mubashar Hasan, Griffith University

Recently Bangladesh was side-tracked from an electoral democracy. Earlier this year, the ruling party Awami League formed government after a one-sided election. Bangladesh’s major opposition party, the Bangladesh Nationalist Party (BNP), boycotted the election on the grounds that it was not taking place under a neutral caretaker government and that elections held under partisan caretaker governments would not be fair.

Since the early 1990s Bangladeshi political parties had agreed to hold national elections under non-partisan, neutral caretaker governments after the collapse of the Ershad regime and the coming of multiparty democracy. The 2014 election marked a sharp break with this tradition.

Foreign aid, western NGOs, the World Bank and the IMF have helped Bangladesh make considerable progress in health, literacy and general wellbeing. As Amartya Sen has argued, the level of social progress achieved by Bangladesh had brought the country ahead of its much larger democratic neighbour, India.

The problem for Bangladesh, however, is that its politics — embedded with violence, corruption and clientelism — have betrayed its social progress. Worse, radical Islamism has also gained a stronghold in the country. As the gap between poor and rich in the country widened, the idea of Islam being an integral part of politics became more popular. 87 per cent of respondents to a 2013 Pew Research survey said that it is a bad thing that Bangladesh does not fully apply sharia law.

European and American history has shown that liberal democracy can flourish within a religious society. The specific problem for Bangladesh is that both major political parties have injected religion into key state policies such as the Five Year Plans and the state-run Islamic Foundation, as well as educational establishments such as schools, college and universities.

The state-sponsored Islamisation process, later backed by both the BNP and the Awami League, began in the 1980s with active financial support from wealthy Muslim states in the Middle East, who after their defeat in the Arab–Israel war in 1970s and because of their antipathy to Western support for Israel, initiated a global Islamisation process. The aim of this Islamisation process was to resist what these states saw as the Westernisation of poor Muslim states.

A large number of Bangladeshis equate democracy with aspects of economic development, like the building of infrastructure. And while this represents a failure of those who advocate democracy to explain what it is or how it benefits Bangladeshis, it’s easy to see why many are focused on the practical rather than the political. Bangladesh’s government and its NGOs need to work much harder to make ordinary citizens aware of the fruits of democracy including civil and political rights.

The dynastic nature of both national political parties, and the long-standing tendency of party leaders enriching themselves via corruption, can partially explain why both the Awami League and BNP try to distract citizens by promoting a religious identity. The BNP’s alliance with the right-wing Jamaat-e-Islami, a party modelled on the Muslim Brotherhood in Egypt, has made the political situation more complex.

The Indian government raised allegations that during the period of BNP–Jamaat government in 2001–06, with support from Pakistan’s spy agency, Jamaat was responsible for exporting terrorism to India, hence India’s support of the Awami League’s one sided election in 2014. In contrast to India, all Western nation states called for a new election.

In order to try to persuade the Awami League not to hold an election overseen by a partisan government, UN Secretary-General Ban Ki-moon sent his special envoy Oscar Fernandez Taranco, the Assistant Secretary-General for Political Affairs, to attempt to broker a deal between the Awami League and the BNP in 2013. He failed to broker an agreement, and left the country.

The distinction between Bangladesh’s major parties and conventional Islamist parties in terms of engaging or integrating Islam into politics is minimal. Major parties have both constructed an environment in which religion holds an increasingly strong influence in Bangladeshi society. Political Islam sets the framework of Bangladesh’s politics, and is likely to remain so for the foreseeable future.

Mubashar Hasan is a PhD candidate at the School of Government and IR, Griffith University. He is also the co-founder of Alochonaa, a non-religious and non-partisan platform to foster dialogue among civilisations.

Categories: Forum

South Koreans defend their rights in cyberspace

East Asia Forum - Thu, 11/20/2014 - 04:00

Author: Eun Jeong Soh, ANU

Over 3 million South Koreans have downloaded a Germany-based smartphone messenger app, Telegram, while 400,000 users of Kakao Talk — the nation’s most widely used messenger app — terminated their account, in protest against government attempts to crackdown on dissenters.

The mass boycott of Kakao Talk occurred in response to the public prosecutor’s initiative to impose surveillance on personal messaging services. Kakao Talk is an integral part of everyday life of Koreans; of the country’s population of 50 million, 35 million use the smartphone application. By terminating their user accounts, these ‘cyber exiles’ asserted their right to privacy and freedom of expression and attracted domestic and international attention regarding the state’s intrusion and control of cyberspace. In response, Daum-Kakao hurriedly announced that the company would not in the future cooperate with the public prosecutor’s warrants for wiretaps or access to stored messages, and would adopt appropriate technology to prevent government screening.

The state control and manipulation of cyberspace and online platforms has been a growing concern since the National Intelligence Service’s systemic involvement in online commenting became evident in the last presidential election. The government access to personal messaging services is a particularly alarming move; it substantiates the concern that the government is determined to monitor private communications in order to protect the president. It began with President Park Geun-hye’s remark on 16 September ‘not to neglect debunking remarks which bring about social polarisation’ in the context of a prolonged debate over the president and the government’s response to the sinking of Sewol. In response to this remark, the public prosecutor demanded four major domestic IT companies to cooperate with the prosecutor’s request to ‘gain real-time access, share information and delete messages’ that are considered ‘groundless rumours on socially controversial issues, false statements, and debunking statements’. 

But it was revealed that government surveillance on private messaging services had occurred in the past. In the first half of this year, Daum-Kakao received 61 warrants to wiretap user accounts and 2131 requests to release user information, and the company had cooperated with more than three quarters of the requests. This means ‘near real-time’ surveillance as well as a large-scale screening of completed contents had already been made. It was further revealed that the number of police searches of e-mails and mobile messengers has doubled under President Park’s administration.

This raises a further concern that government agencies can gain access to the servers of the companies and can freely collect information even without search warrants, as the United States’ NSA and FBI did in cooperation with nine IT companies under the PRISM program. 

So how did Telegram come about as an alternative? Kim Ŏ-joon, the host of an internet-only show Papa Is, introduced Telegram as a safe alternative on 1 October, thanks to its commercial-in-confidence chat function which does not save records on the servers, and a delete function which allows users to erase messages forever on both sides of the conversation. What was further attractive about Telegram was its philosophy, reflected in the app motto, ‘Taking Back Our Right to Privacy’. Kim commended the founder, Pavel Durov’s, refusal to release VK (Russia’s largest social network) user information upon the request of the Russian Federal Security Service, which was contrasted with Kakao Talk’s docile response to the demands of the South Korean government. The software used in Telegram were considerate choices based on the founder’s consciousness about privacy protection. Within one week of the release of the show, 1.5 million Koreans registered as Telegram users.

This mass action taught South Korea’s IT companies and engineers an important lesson: that the rights of the user should be the foremost priority. The cyber exiles also taught the government that any further moves to violate privacy and curtail freedom of speech would damage its reputation and would attract critical international attention and scrutiny. But most importantly, it taught technology users that they themselves had a responsibility to be ‘technology-literate’ to protect their own rights.

Eun Jeong Soh is a post-doctoral fellow at the School of Culture, History and Language, at the ANU College of Asia and the Pacific. She participates in ARC Laureate Project, ‘Informal Life Politics’.

Categories: Forum

Uncertainty at home brings calm to the Thai–Cambodian border

East Asia Forum - Wed, 11/19/2014 - 16:00

Author: Nicole Jenne, European University Institute

Domestic uncertainties in Thailand and Cambodia have hindered progress along the heavily militarised border and the Preah Vihear temple dispute.

Between 2008 and 2011 the border around the ancient Khmer temple of Preah Vihear (Phra Viharn in Thai) was the site of repeated clashes between Thai and Cambodian troops. Open conflict was put on hold when Cambodia submitted the dispute to the International Court of Justice in 2011. More than two years later the Court confirmed Cambodia’s ownership over part of the disputed territory, leaving the adjacent area subject to bilateral negotiations.

Months before the military took power in Bangkok in 2014, Cambodian prime minister Hun Sen realised that he could no longer rely on a ‘red’, Thaksin-linked government holding power in Thailand. The Thai army made it clear that while it was tied up with the internal crisis, it would be in charge along the border as well. This was most obvious when the Thai government was unable to follow through with a plan to allow Indonesian observers, under the banner of ASEAN, to be stationed at the conflict site. The Abhisit-brokered agreement was rejected by a number of officers who had served on the Thai–Cambodian border and who enjoyed backing from the highest positions in the military. The situation did not change under Yingluck, who left the military free in dealing with Cambodia.

This prompted Hun Sen to end any visible support to Thaksin and the red shirt movement. This was a marked contrast to late 2009, when Hun Sen appointed Thaksin as his economic adviser and when he allowed tens of thousands of red shirt supporters to meet Thaksin when speaking in Siem Reap in April 2012.

Increasingly, Cambodia relied on military-to-military contacts to manage the situation on the ground, starting with local commanders, who were instructed to share not only information but also dried fish. When the Thai military took control in Bangkok, Cambodia’s Deputy Prime Minister and Minister for National Defence Tea Banh was the first ASEAN high-level politician to visit. Hun Sen did not waste any time, delivering his congratulations to Prayuth Chan-ocha the day after the Thai army chief was appointed prime minister. Cambodian officials even thanked the National Council for Peace and Order (NCPO) for managing the swift return of an estimated 200,000 Cambodian workers to Thailand, whose sudden outflow had ironically been triggered by the coup.

In Cambodia, Hun Sen’s Cambodian People’s Party lost 22 of 123 seats in the 2013 election. Economic development and job creation are now among the top priorities of the party to counter its loss of popularity, especially among the young generation. Good relations with Bangkok are therefore badly needed: Thailand is the second biggest importer of Cambodian goods after China. In addition, the Thai economy provides jobs for an estimated 400,000 Cambodians.

It is unlikely that Phnom Penh will be pushed to abandon its soft course. Despite — or perhaps precisely because of — the opposition’s overwhelming focus on the eastern border with Vietnam. The opposition parties have so far endorsed CPP’s policy in regard to Thailand. The border dispute effectively remained a non-issue when Cambodia protested a newly polished fence in front of Preah Vihear — in an area that is still to be demarcated — only days after the coup. When a shooting incident at a border post nearby made it into the news in early October 2014, both sides hushed up the issue. In the meantime, restoration works at the temple are undertaken with utmost care — to comply with the management plan endorsed by UNESCO’s World Heritage Committee and in order to avoid raising Thailand’s attention.

Cambodia would likely welcome talks on the land border and the maritime boundaries sooner rather than later. But the NCPO has signalled that talks will only resume once Thailand’s domestic situation is more certain. The border around Preah Vihear will doubtlessly remain a thorny issue. Any proposal by the Thai to develop the Preah Vihear World Heritage site jointly is likely to be ignored in Cambodia just as it happened when Prayuth brought it up at his visit in late October. But this does not foreclose other forms of cooperation in order to boost tourism at the temple. Nor does it mean that survey and demarcation work along the border needs to remain on standby. Talks on the maritime areas can also resume independently of the land border negotiations.

But with the question of royal succession looming over the Thai conflict, it is difficult to predict when Thailand will find a way out of its domestic crisis. Measures already adopted by the NCPO suggest that the military will strengthen its grip on power.

For the border dispute, this means a likely end to the high turnover of office holders and differing voices that have greatly increased uncertainty for Phnom Penh in the past. Now in the driver’s seat both at the border and in Bangkok, the Thai army will soon have to show how committed it is to put an end to the conflict. So while renewed fighting is unlikely, the Thai military will soon have to nail its colours to the mast.

Nicole Jenne is a PhD researcher at the European University Institute in Florence, Italy.

Categories: Forum

Remembrance, reconciliation and the East Asian memory wars

East Asia Forum - Wed, 11/19/2014 - 04:00

Author: Tessa Morris-Suzuki, ANU

‘The past’, as William Faulkner once wrote, ‘is not dead, it isn’t even past’. Nowhere is this more true than in today’s East Asia. The recent ‘memory wars’ between the countries of the region — particularly (though not exclusively) between Japan and its neighbours China and Korea — are eloquent testimony to the power of the past to haunt the present and influence the course of domestic and international politics.

As Cold War tensions in East Asia diminished from the 1980s onwards and as the events of the Asia-Pacific War receded, it might have been assumed that memories of war and colonialism would also fade. Instead, the opposite has happened. Unresolved issues of historical justice and restitution have smouldered and, fanned by the winds of rising nationalisms, emerged as sparks which threaten to ignite new regional antagonisms.

In the past two years particularly, the governments of the region have staged a series of contending political performances to enshrine or to erase the memory of particular historical events, particularly events associated with Japan’s early twentieth century imperial expansion and the Asia-Pacific war. The December 2013 visit by Japan’s Prime Minister Shinzo Abe to the Yasukuni Shrine — the Shinto shrine to the war dead in which executed war criminals are also venerated — evoked fierce criticisms from Korea and China.

These criticisms were amplified in mid-2014, when the Japanese government appointed a committee to re-examine the process that led to the issuing of the 1993 Kono Declaration, which is the Japanese government’s most significant apology to women from Korea and elsewhere coerced into military brothels during the war. The committee’s report is widely perceived as having undermined public confidence in the declaration and undone much of the good achieved by the 1993 apology.

Meanwhile, in January 2014 a new museum was opened inside railway station in the Chinese city of Harbin, the site of the assassination in October 1909 of Japanese elder statesman and former resident-general of Korea Ito Hirobumi. The memorial, proposed during the meeting of South Korean President Park Geun-hye with Chinese president Xi Jinping in 2013, was greeted with expressions of outrage from the Japanese government and from many sections of the media in Japan, for it honours the memory not of Ito but of his assassin, prominent Korean nationalist Ahn Jung-geun, who was subsequently executed for the crime by the Japanese Kwantung military administration. Japan’s Chief Cabinet Secretary, Suga Yoshihide, lodged official objections with the South Korean and Chinese governments, describing Ahn as ‘a terrorist who was sentenced to death for killing our country’s first prime minister’. The memorial’s proponents, on the other hand, retort that Ahn was not a mere assassin but a political idealist and the author of a visionary (though incomplete) plan for peace in East Asia.

But it is perhaps a small incident, little reported in the global media, that most poignantly highlights the destructive, and self-destructive, nature of these conflicts. In 2004, a group of concerned citizens from Japan’s Gunma prefecture erected a monument to Korean forced labourers in a local park. The monument commemorates Koreans who were forcibly brought to Japan during the war to work in mines and on construction sites, where many died. It is a simple stone structure, whose inscription includes the words ‘remembrance, reflection and friendship’ in Japanese, Korean and English. Memorial ceremonies at this site have brought together Japanese locals and members of the Korean community in Japan in shared acts of commemoration.

The Gunma monument is just one of many small-scale local efforts by Japanese citizens and Korean residents in Japan to inscribe the memory of war in public consciousness and to promote a better shared understanding of wartime history between Japan and its neighbours. Dozens of similar citizens’ initiatives have emerged over past decades in a number of local communities from Hokkaido in the north to Kyushu in the south. Japanese academics, publishers, schoolteachers and others have also initiated a wide range of cross-border networks with counterparts in China and South Korea in an effort to create better common understandings of history.

Though these grassroots actions have had relatively little effect on government policy, and have rarely been reported by the media inside or outside Japan, they demonstrate a widespread and sincere popular Japanese recognition of the wrongs of the past and a hope for peaceful relationships with the other peoples of the region.

But now, with the rise in nationalist emotions in Japan and the region more widely, the Gunma memorial has come under attack from a variety of right-wing groups whose members have bombarded the prefectural government with complaints that the monument is ‘anti-Japanese’. In July 2014, the prefectural authorities announced that they would not renew the planning permission that allows the Gunma monument to remain in place, forcing the citizens who created this symbol of reconciliation and goodwill to remove it. Elsewhere, similar attacks on the work of reconciliation groups are gathering force.

Reading news reports on the Gunma monument, one wonders how world opinion would react if complaints from German far-right groups led to the destruction of that country’s monuments to its forced labourers. The removal of the Gunma memorial, if it goes ahead, will not change the facts of history nor will it make the world forget those facts.

The Japanese authorities, rather than trying to undo the decades of good work that has been done by their own citizens to build bridges to Asian neighbours, should be celebrating and supporting that work. Japan’s rich tradition of grassroots reconciliation action has generated a wealth of networks and knowhow that political leaders could use and learn from. The Gunma memorial and others like it should be preserved and embraced as small but precious monuments, not just to the victims of imperial violence and war but also to the goodwill of the many Japanese citizens who long for regional peace, cooperation and understanding.

Tessa Morris-Suzuki is an ARC Laureate Fellow based at the School of Culture, History and Language, at the College of Asia and the Pacific, The Australian National University.

This article appeared in the most recent edition of the East Asia Forum Quarterly, ‘A Japan that can say ‘yes’‘.

Categories: Forum

Abbott’s awkward APEC moment

East Asia Forum - Tue, 11/18/2014 - 16:00

Author: James Laurenceson, ACRI

Forget shirt-fronting Russian President Vladimir Putin. Australian Prime Minister Tony Abbott’s most challenging task in the summit season was breaking an uncomfortable silence with Chinese president Xi Jinping. And he had to do it twice: first at the APEC meeting in Beijing and again at the G20 in Brisbane.

After vigorous lobbying by the US and Japan, Australia’s involvement in the China-led Asia Infrastructure Investment Bank was scuttled by the National Security Committee of federal cabinet on strategic grounds.

This does clarify the matter because trying to make sense of rejecting the proposal on the basis of economic reasoning is nigh on impossible. In 2011 the Asian Development Bank estimated Asia required US$750 billion each year through to 2020 to finance infrastructure needs. In 2012 the amount the ADB lent for infrastructure was just US$7.5 billion. It is no surprise that among the government ministers it was Treasurer Joe Hockey and Trade Minister Andrew Robb who were keen on Australia joining the AIIB.

The decision to rebuff China’s invitation is awkward to say the least. Australia made reducing barriers to infrastructure investment a focal point of the G20 agenda. There is also the small matter of the memorandum of understanding the Australian and Chinese governments signed in 2012 on enhancing cooperation in infrastructure construction.

What then is the strategic test the AIIB failed?

The reason Abbott has repeated is the AIIB is a unilateral institution dominated by just one country. This means its lending decisions might be used by China to peddle its own interests. What Australia wants to join is an AIIB committed to being a multilateral institution along the lines of the ADB or the World Bank.

The AIIB is dominated by China. The 21 founding member countries agree the basic parameter determining the capital structure of the new bank will be relative GDP. Taken at face value, this would give China a 67.1 per cent shareholding, with the next in line being India at 13.3 per cent.

Of course the complaint the AIIB is a unilateral institution relies on painfully circular logic. If the US, Japan, Korea and Australia refuse to join, then any hopes of the AIIB becoming a multilateral institution are neutered. If these four countries were on board, China’s share would immediately fall to 24.5 per cent.

For its part, China not only invited Australia to participate but also offered the country a senior role in its running. China’s finance minister Lou Jiwei has made it clear he expects China’s shareholding will be diluted as other countries come on board.

It is also not hard to guess how China would take to being told that the World Bank and ADB are models of multilateralism. In 2010, after years of trying, the World Bank agreed to raise China’s voting share from 2.8 per cent to 4.2 per cent. This still left it trailing Japan on 6.8 per cent and the US on 15.8 per cent. Yet China’s GDP is already double that of Japan and its population is more than ten times larger.

Abbott’s argument that Australia should stay away from the AIIB because China may use it to advance its own nefarious purposes falls short on several counts.

China is already more than capable of pushing its own interests through existing institutions such as the China Development Bank. The idea it would sponsor a new institution and then invite countries such as Australia to become partners in crime fails any test of common sense.

Then there is the point made by the former Australian ambassador to China, Geoff Raby. That is, if transparency in lending decisions is a genuine concern, the most effective way of dealing with it is from the inside. Clearly this was the view taken by Singapore, a country that routinely ranks higher than Australia on international surveys of transparency and governance.

AIIB members all have very different broader strategic interests. Vietnam and the Philippines are engaged in heated territorial disputes with China in the South China Sea. Yet this did not stop them uniting for the common goal of improving regional infrastructure.

The only strategic end being served by not joining the AIIB is Australia supporting the US and Japan in their attempt to preserve the status quo in the Asia Pacific. The problem is the status quo ended in 1979 when China began its reintegration into the global economy.

James Laurenceson is Deputy Director of the Australia China Relations Institute (ACRI) at the University of Technology, Sydney.

This article was first published here on The Conversation.

Categories: Forum

Can Japan’s National Security Strategy outlive Abe?

East Asia Forum - Tue, 11/18/2014 - 04:00

Author: Yuki Tatsumi, Stimson Center

On 17 December 2013, Prime Minister Shinzo Abe issued Japan’s first National Security Strategy (NSS). The document declares that Japan will make a more ‘proactive contribution to peace’ based on the principle of international cooperation. It also outlines three basic goals for Japan’s national security — ensuring the nation’s territorial sovereignty, improving the security environment in the Asia Pacific region by cooperating with the United States and other regional partners, and active participation in global efforts to maintain international order. While all these goals are admirable, the real question is whether the policy priorities defined by Abe can outlive his term.

During his visit to Washington DC in February 2013, Abe said he believed that Japan should remain a ‘first-class nation’. That is, it should belong to a group of nations that shape international rules and norms, and contribute to the stability of the global security environment. In a sense, the NSS is a document that outlines Abe’s perception of what Japan should do to join this group. The quick ascension of China — which has been emboldening Beijing for the last few years — no doubt influences Abe’s views. He sees Japan’s ‘proactive contribution to peace’ as critical to countering the rise of China.

The Japanese prime minister’s commitment to the principles identified in the NSS predates its release. Abe has spearheaded important changes in Japanese diplomacy since his cabinet was inaugurated in December 2012. So far he has focused his efforts on strengthening bilateral security cooperation and promoting respect for international norms.

Abe has sought to deepen bilateral security cooperation not only with the United States but also fellow US allies and other key security partners. For example in 2007, during Abe’s first term as prime minister, he paved the way for deeper Japan–Australia bilateral security links by signing the Joint Declaration on Security Cooperation. Since December 2012, Japan–Australia security relations have reached a new level of closeness, with the Tokyo ‘two-plus-two’ meeting (that is, a bilateral ministerial meeting that includes both foreign and defence ministers) in June 2014 followed by Abe’s visit to Australia on 8–9 July 2014.

Abe has also demonstrated a clear desire to forge a closer security relationship with India. Although Japan moved to forge a closer relationship with India in 2000, Tokyo’s diplomatic outreach to India also accelerated between 2006–07 when Abe was the prime minister the first time. Strengthening of Japan-India relations have enjoyed bipartisan support since then, culminating in the signing of Japan–India Economic Partnership Agreement (EPA) in February 2011. Similar to Japan–Australia relations, Abe clearly intends to pursue qualitative enhancement in this bilateral relations. In 2013, Emperor Akihito and Empress Michiko visited India as state guests in 2013 (Emperor Akihito returned to India for the first time in 53 years), which carries considerable diplomatic significance. About eight weeks following their visit, Abe himself visited New Delhi in January 2014, when he signed the Joint Declaration for Strategic and Global Partnership.

Southeast Asia and Europe are also included in the diplomatic foray — two regions in which Japan has had enduring foreign policy interests but where it has been unsuccessful in establishing concrete policy initiatives. In regards to Southeast Asia, Abe has become the first Japanese prime minister to have visited all 10 ASEAN member states. He also was the first Japanese prime minister to be invited to deliver the keynote speech at the annual Shangri-La Dialogue in Singapore in May 2014. Among ASEAN members, Abe has placed particular emphasis on reaching out to the Philippines, Vietnam and Myanmar — countries that share Japan’s concern about China’s increasingly assertive stance on territorial disputes.

In Europe, Abe participated in the North Atlantic Council meeting and NATO meeting in Brussels on 6 May 2014 to articulate why Japan and Europe are ‘natural partners’. Leveraging the efforts to institutionalise closer ties between Japan and NATO, including the 2010 agreement on securing classified information and related material, Japan under Abe’s watch convened joint research on humanitarian assistance and disaster relief with NATO. Furthermore, Abe and NATO Secretary General Anders Fogh Rasmussen signed Individual Partnership and Cooperation Program during his visit to Brussels. Japan has also aggressively pursued security dialogue with NATO member states on bilateral basis. For example, it held its first ‘two-plus-two’ meeting with France in January 2014. A Japan–UK ‘two-plus-two’ meeting is also in the works for later this year.

Also high on Abe’s agenda is promoting respect for international norms. Abe has emphasised the importance of an open and free global commons in the sea, air, cyberspace and space. In his first foreign policy speech in January 2013, he discussed the importance of a free and open maritime domain — a consistent theme in most of his major foreign policy speeches, including his keynote address at this year’s Shangri-La Dialogue. From Washington to Singapore, to Brussels, to Canberra, the central focus of Abe’s speeches has been the preservation of free and open seas, and the necessity of upholding international norms such as freedom of navigation.

Abe is also seeking to revamp Japan’s foreign and security policy toolkit. This includes institutional adjustments such as establishing the National Security Council (in November 2013) and legal adjustments such as enacting laws to protect classified information and the recent controversial decision to alter Japanese government’s position on the self-imposed complete prohibition on exercising the right of collective self-defence. Furthermore, his efforts include revising past policies, such as the release of the National Defense Program Guidelines in December 2013 and the recalibration of Japan’s arms export controls in April 2014. In addition, the Official Development Assistance Guidelines are to be further revised by the end of the year to create greater room for Japan to provide foreign assistance to help aid recipients to boost their security capacity.

These changes, if implemented fully and consistently by the governments that succeed Abe, will go a long way to putting Japan in a position where it can help to shape the global and regional security environment. It will allow Japan to have robust partnerships with countries other than the United States (Tokyo’s only treaty ally) while continuing to anchor Japan’s foreign and security policy to strong ties between Tokyo and Washington.

Abe’s efforts have already borne fruit, mainly in broadening the potential for Japan’s cooperation on defence equipment with US allies worldwide. Japan’s relations with the UK and Australia are most notable in this regard. On 4 July 2013 Japan signed an agreement to jointly develop defence equipment with the UK as well as an agreement to protect classified information. This institutionalised the security relations between Japan and UK based on the defence co-operation memorandum of understanding, which was signed in 2012. Japan and Australia have signed an agreement on joint research in submarine technologies. In Southeast Asia, Japan is already working with Indonesia and the Philippines to transfer Japanese coast guard equipment to help shore up their coast guard capacities.

But momentum is critical to build on these initial successes. As these agreements proceed to the implementation phase, it will be easy for the process to be bogged down by interagency competition as well as domestic resistance. The ultimate success of Japan’s multifaceted engagement outlined in the NSS depends on whether Japanese leaders, including Abe himself, can continue to exercise strong leadership.

The policy principles that are laid out in the NSS, while effective, are designed for Japan’s peacetime activities. How Japan can expand its participation in activities in times of crisis or post-conflict — whether as a part of peacekeeping forces that are organised under the UN or multinational forces that may or may not have UN mandates — still has not been thought through. While there has been an ongoing debate inside Japan over the right to collective self-defence, discussion about its participation in regional and global collective security frameworks has been absent. This suggests that Japan may still be unable to act promptly in times of crisis.

Japan’s strained relationship with South Korea also continues to handicap its efforts to expand cooperation with its fellow US allies. Both Tokyo and Seoul share responsibility in allowing the historical animosity to severely limit areas of practical policy cooperation. Without reconciliation with Seoul, another key US ally in Northeast Asia, Japan’s ability to play a robust and visible role in regional and global security issues will continue to be constrained.

Finally, the fact that the current NSS strongly reflects Prime Minister Abe’s own policy outlook may work against the longevity of the document. In principle, the NSS replaced the 1953 Basic Principles of National Defense and is expected to continue to define Japan’s national security policy priorities even after Abe departs. But, because it is very clear that the document reflects Abe’s own foreign and security policy views, it is just as likely that Abe’s successor will decide to revise the NSS to communicate his or her own policy preferences. Whether the policy of ‘proactive contribution to peace’ will have an enduring impact on Japan’s core foreign and security policy principles after Abe remains to be seen.

Yuki Tatsumi is Senior Associate of the East Asia program at the Henry L. Stimson Center, Washington DC. She has worked as the special assistant for political affairs at the Embassy of Japan in Washington.

This article appeared in the most recent edition of the East Asia Forum Quarterly, ‘A Japan that can say ‘yes’‘.

Categories: Forum

Australia and China after their FTA

East Asia Forum - Mon, 11/17/2014 - 16:00

Author: Peter Drysdale, East Asia Forum

The past week has seen big breakthroughs in Asia Pacific economic diplomacy. At the APEC summit, Xi Jinping and Shinzo Abe broke the diplomatic ice in the China–Japan relationship. The United States and China paved the way towards extending the successful International Technology Agreement through the WTO. They also did a game-changing deal that will entrench deep cuts to carbon emissions through to 2025–30. China brought trans-regional (as opposed to Eastern and Western Pacific) integration back to centre stage in APEC’s quest for open regionalism. And in Brisbane, the G20 summit has crafted a global recovery strategy around broad-based cooperation on productivity-enhancing reforms and infrastructure investment, re-focused on the WTO and brought climate change back into play.

At the edges of the APEC meeting, China also moved to conclude free trade deals with South Korea and Australia, for both of which China is already the largest trading partner by far.

The conclusion of the Australia–China free trade agreement during President Xi Jinping’s state visit to Australia this week represents a major step forward in the bilateral relationship. The agreement will serve to deepen integration between the two economies, with substantial efficiency-enhancing liberalisation of trade, services and investment flows. It could also provide a pillar on which to anchor a much broader economic and political relationship that recognises the countries’ common interests in regional and global affairs.

Australia’s Trade Minister Andrew Robb had put priority on wrapping up the free trade agreement with China for a number of reasons. It was the last of the three big deals outstanding when the Coalition government came to office — settling with China after doing deals with South Korea and Japan delivered the trifecta. It sorted out anomalies in our huge trade relationship with China that were a hang-over from China’s deals with ASEAN, New Zealand and Chile, Australia’s competitors in important Chinese agricultural commodity markets. In this sense the new agreement serves to correct the discrimination that had crept into our dealings with China because of the preferential deals that others had secured. It also provided opportunity to address the tangle that both the present and former Australian governments had got into over Chinese investment in Australia, and build a more confident and beneficial investment relationship — though there are still issues about SOEs to be sorted out on China’s place in Australia’s foreign investment regime.

The agreement is a significant outcome from President Xi’s visit to Australia and the Australian government’s commitment to get the deal done. That it is being cast as a ‘living’ agreement, one that will incorporate review and extension as the commercial relationship between the two countries continues to evolve, though it signals that all issues haven’t been resolved at the first step, does not qualify the achievement.

Yet, there are many elements in the rapidly evolving bilateral economic relationship between the two countries that cannot readily be enfolded in a traditional free trade agreement of this kind and go well beyond its province, however open-ended its negotiation over time.

Indeed, while the agreement improves market access and commercial treatment at the margins for both parties, the real foundations of China’s economic partnership with Australia and its partners around the world, including the United States and Japan with neither of whom it has such a preferential bilateral trade agreement, or ASEAN and South Korea with whom it now does, are multilateral and global in character.

How are we to judge this achievement in economic diplomacy alongside the uncertainties that persist in Australia’s broader dealings with China? Australia’s recent demurral from signing on to the development of the China-instigated Asian Infrastructure Investment Bank left many in the region wondering about both the rigour and the independence of Australia’s assessment of its national strategic interests, and the US President needing to re-assert the consistency in his country’s rhetoric on the US–China relationship. These can be accepted as momentary fumbles and open — as Australian Prime Minister Tony Abbott has said — to further consideration, but they raise questions about the big strategic setting in which this latest step forward will have impact big or small.

As leading Chinese analyst, He Fan, says in this week’s lead essay, Australia is in fact well placed as an important player in the surge of strategic diplomacy around China’s new place in the world. The question is how can Australia leverage more out of its close economic relations with China?

The world trading system is undergoing a complex and difficult transition. What worries China most in this process is the threat of a backlash against globalisation in our region. Australia, with its strong record of support for trade liberalisation and open regionalism in Asia, can help guide China and other countries through these questions ‘as Asia’s dependable voice’ on the trade regime, in negotiation of a Regional Comprehensive Economic Partnership and in the WTO. And, following the most recent example of Indonesia, joining the AIIB still provides Australia with an opportunity to influence the direction and operation of that new organisation.

Australia also has an important role to play with China in the global theatre. When China assumes the presidency of the G20, Australia is strongly placed to help it get the right outcome.

Categories: Forum

US–China agreement presages a change in the air

East Asia Forum - Mon, 11/17/2014 - 04:00

Author: Frank Jotzo, ANU

The joint Chinese–American announcement of emissions targets brings the world a big step closer to meaningful post-2020 action on climate change. Barack Obama in his Brisbane speech made it clear where the two superpowers see things going: ‘If China and the United States can agree on this, then the world can agree on this’.

The situation leading into the 2015 Paris climate conference is fundamentally different from Copenhagen in 2009. Then, confusion and suspicion reigned, and while China made a significant unilateral emissions pledge, it upheld the age-old division over climate action between developing and developed countries.

Now, there is a deal between the two major emitters — and as I foreshadowed in October, a China–US deal this year had been on the cards for some time. Other countries can use it as a yardstick, and it will instill confidence.

There are two crucial factors that explain China’s engagement on climate change.

The first is China’s willingness to take a leadership role on matters of global concern. Beijing judges that climate change and climate action will be important strategic and economic issues, and so it wants to lead, not follow.

The second is a new view of the opportunities that climate change action can bring. President Xi Jinping has decried the old model of development as ‘unbalanced, uncoordinated and unsustainable’, and called for emphasis on the quality rather than just the speed of economic growth.

Action to cut emissions is in tune with those objectives. It is not only about limiting future climate change impacts, which could hit China hard.

Cutting coal use improves air quality and thereby quality and length of life. Reducing reliance on fossil fuels improves energy security. Improving energy efficiency can yield economy-wide productivity gains. Investing in innovation can yield business leadership in new energy technologies. China also seeks to shift in economic structure towards higher value manufacturing and services to sustain growth beyond the middle income phase. This will reduce the energy intensity of economic growth.

‘China will lead the world to by providing a blueprint for a new climate economy’, concluded a Tsinghua University report released last week by the New Climate Economy project. Obama called out the ‘false choice’ between development and cutting pollution, and noted that developing countries can ‘leap-frog some of the dirty industries that powered our development’.

The new Chinese and US emissions pledges are meaningful even though they fall short of trajectories that would lead to an even chance of limiting long-term global warming to two degrees.

China committed to stop the rise in its CO2 emissions by 2030, and to increase the share of ‘clean’ energy to 20 per cent of its overall energy supply. This requires expanding the policy effort already underway in China, including through emissions trading and energy market reform.

Many observers consider that a CO2 peak at 2025 or earlier is possible. Reaching an emissions peak by 2030 implies a much earlier peak in coal use, as the consumption of oil and natural gas will keep growing for some time.

China is likely to translate the commitment made last week into a series of more concrete pledges, probably including a date for ‘peak coal use’, as well as a pledge for emissions or emissions intensity after 2020. Previous experience suggests that the Chinese government is serious about keeping its commitments.

The United States committed to a reduction in national greenhouse gas emissions by 26 to 28 per cent at 2025, relative to 2005. This implies roughly twice the rate of annual reductions in the first half of the 2020s, compared to the existing target of a 17 per cent reduction from 2005 to 2020. US emissions reached a plateau in the first half of the 2000s and started falling in 2008, helped by the rise of natural gas. The US also pledged three billion dollars to the UN Green Fund for climate action in developing countries.

The Obama administration is pursuing emissions reductions through regulatory measures, while some states have already implemented market-based mechanisms to reduce emissions.

Despite the obvious potential for a turnaround from Obama’s legacy-building climate policy, especially if there is a Republican administration post-2016, it stands to reason that a future administration would find it difficult to break away from the accord established with China, or indeed to halt the US domestic trend towards a lower-carbon energy system.

Joint leadership by China and America creates pressure for other countries to make meaningful climate commitments, and policies to match. Being out of line would come at a cost.

It will also create a measure of confidence for other countries that policies to cut back on emissions will not damage their economies. Broader action means there is less fear of disadvantage to domestic producers. And the new thinking on economic growth opportunities may catch on. If China does it, many developing countries will try to emulate it.

Agreement among the big two also smoothes the road to a new global climate agreement, to be worked out over the course of 2015 and to be sealed at the December 2015 Paris UN climate conference.

Meanwhile, governments of some fossil fuel exporters like Australia, Canada and Saudi Arabia seem to focus on a narrowly defined self-interest in protecting established high-carbon industries.

The Australian government reportedly fought to downplay climate change in the G20 deliberations and communiqué. Prime Minister Tony Abbott on several recent occasions made statements in support of coal above all other sources of energy. The US President’s reminder in his speech that Australia has much to lose from climate change seems to have had little immediate effect on Australia’s stance.

But with climate change now firmly on the international policy agenda once more, it will be difficult for a small number of countries in an Axis of Carbon to sustain a fundamental opposition against climate policy.

The China-US pact will help focus domestic debate in Australia and elsewhere on the benefits that a low carbon future can bring, and the need to get the transition underway rather than perpetuating old industrial structures.

At a minimum, it will drive governments to make climate commitments sufficient to avoid international embarrassment and the risk of alienating allies and key trading partners.

Frank Jotzo is an ANU Public Policy Fellow and director of the Centre for Climate Economics and Policy at the Crawford School of Public Policy. He co-ordinates a collaborative research program between Chinese and Australian institutions on climate policy.

Categories: Forum

Lifting Australia’s influence on China

East Asia Forum - Sun, 11/16/2014 - 18:00

Author: He Fan, CASS and ANU

Chinese President Xi Jinping is attending the 9th G20 Summit in Brisbane and is about to make a formal state visit to Australia. It could be a historic time for strengthening strategic cooperation between Australia and China.

Australia is well positioned to be an important player in the global arena, especially in Asia. Unlike Japan, Australia has no geopolitical conflicts with China, and does not need to worry about the so-called ‘China threat’. The economic structures of the two countries are complementary rather than competitive. China’s rapid economic growth in the last three decades has led to a boom in the Australian economy. China has become Australia’s largest trade partner: of every three dollars of the goods and services that Australia exports, one dollar flows from China. How can Australia leverage more out of its close economic relations with China? Apart from further deepening the bilateral economic cooperation through the newly endorsed free trade agreement, Australia and China can collaborate on several critical issues of importance to global governance, where Australia has the potential to increase its influence with China.

It appears that the China–Australia Free Trade Agreement, after nearly a decade of talks, will be finalised in time for President Xi’s state visit. This could benefit the Australian economy by around AU$2 billion (US$1.8 billion) a year. Besides the mining sector, which has gained a lot from China’s industrialisation and urbanisation, the services sector, which constitutes around 70 per cent of the Australian economy, will now have more access to the expanding Chinese market.

The world trade system is undergoing a rough transition. The WTO Doha negotiation remains stalled, and regional trade negotiations in Asia are as messy as a spaghetti bowl. The TPP, backed chiefly by the US, the Regional Comprehensive Economic Partnership (RCEP), proposed by the ASEAN countries, and the Free Trade Area of the Asia and Pacific (FTAAP), raised again by China at the APEC Summit meeting in Beijing, will be viewed by many as a competition for economic leadership in this region. Australia is in the unique position of being a partner in both the TPP and RCEP, as well as a major party in FTAAP from its origins. What worries China is a potential clash among blocs and backlash against globalisation. Australia, with its strong record of support for trade liberalisation and open regionalism, can help guide China and other countries through these issues as Asia’s dependable voice on trade negotiation.

Improving infrastructure can pave the way for long-term sustainable economic growth, create productivity-enhancing capacity in developed countries, and help alleviate poverty in developing countries. The demand for infrastructure investment is huge, yet there is a wide funding gap. Innovation and new institutions are needed for the financing of large infrastructure projects. In this context, China launched the 21-member Asian Infrastructure Investment Bank (AIIB). Australia showed interest at first, but has so far turned down the invitation to join.

Australia’s main concern, according to reports from the government, was the apparent lack of transparency of the structure of the bank. But if that were the case, Australia would have more influence by being involved than by standing outside. If China really wants to use the bank for its own benefit, then it would not have bothered to invite other countries to join. It is already investing billions of dollars abroad on infrastructure building, and will continue to do so. The reason that China took the AIIB initiative, which ties its own hands by joining a multilateral institution, is to shoulder more responsibility and increase its credibility as a global partner. Joining the AIIB still provides Australia with an opportunity to influence the direction and operation of this new international organisation.

Australia has made a great contribution to the G20 by insisting on economic growth as the priority of the agenda. Rather than finger-pointing and blame-shifting, now member countries are trying to work together on a series of practical issues like infrastructure investment, international tax cooperation, and job creation. While the legitimacy of the G20 has declined in the last several years, the success of the Brisbane G20 Summit will help to boost morale.

A number of think tanks in China and elsewhere are urging China to offer to take the presidency of the G20 in 2016. If this occurs, it would provide another chance for Australia and China to work closely with each other on global governance. In the G20 a ‘troika’ made up of the current, immediate past and next host countries work together on the summit agenda. If China takes the 2016 presidency, the troika would consist of Turkey, Australia and China.

China is rising steadily and trying to find its place in the new alignment of global power. The G20 is a major platform for dialogue and coordination between developed and developing big countries. China feels far more at ease at the G20 than in other forums like the G8. China needs the G20, and the G20 needs China. If and when China assumes the presidency, it should seek to strike a balance between the developed and developing countries in a well-designed agenda and through efficient organisation. This would boost the credibility of G20 greatly. Australia could provide valuable help in getting the right outcome.

The coming two years may well provide a special window of opportunity for progress in Sino–Australian cooperation. If this is to be the case, both countries will have to adopt a more forward-looking and proactive attitude. Each country has its own different diplomatic tradition, but to foster collaborative relationships, they will need to develop a habit of thinking collectively about common challenges of global economic governance together.

Dr He Fan is Deputy Director of the Institute of World Economics and Politics in the Chinese Academy of Social Science and currently Visiting Fellow at the Australian National University.

Categories: Forum

Global cooperation on lifting growth and other G20 outcomes

East Asia Forum - Sun, 11/16/2014 - 04:00

Author: Peter Drysdale, East Asia Forum

Overall, the economies of Asia are a bull element in global recovery and long term development. The advanced countries, although less so now the United States, remain a drag on the world economy with no sign that Europe is likely to emerge from stagnation any time soon. Kemal Derviş and Homi Kharas point out that some argue that the European economies (and perhaps Japan) are doomed, through demographic and technological circumstance, to a long period of very low rates of growth; that their potential rate of growth is likely not much above their actual growth in recent times.

With the overall growth rates of emerging economies four to five times as high as those in Europe, they contribute the largest share to global growth. And even with convergence between the emerging economies, in which most of the world’s poor live, and those that are home to the rich, there is the question of whether their current growth rates are near their potential rates of growth.

That’s why the focus of the Brisbane G20 summit on lifting global growth was so important.

While China’s growth rate may be close to its potential, the structure of its growth is not sustainable and, for most of the developing world, including India, actual growth is way below potential.

Global growth between 2004 and 2007 was running at 5.1 per cent, with growth over this period at 2.9 per cent in advanced economies and 7.9 per cent in emerging markets. This may have been close to or above the trend potential rate of growth. From 2011 to 2014, global growth was 3.4 per cent, with growth of 1.6 per cent in advanced industrial countries and 5.2 per cent in emerging market economies. The IMF now forecasts global growth for 2014 at 3.3 per cent, and growth for advanced economies of 1.8 per cent and emerging economies of 4.6 per cent. But these forecasts continue to soften.

It is difficult to accept that rates of growth in advanced or emerging economies are near or nudging potential rates of growth. In Europe there are vast pools of unemployed labour, especially among the young. In emerging economies on the way through lower to higher middle income, and catching up with the industrial frontier, growth rates at 6 to 10 per cent are the norm. As China moves to upper middle income, growth potential is easing back from 7 to 8 per cent to 6 to 7 per cent and the trajectory is for growth a percentage point or so lower over the coming decade. India and Indonesia in the Asian region, and South Africa and Brazil outside, are languishing below their potential rates of growth.

Is the world condemned to a new normal of stagnation and low rates of economic growth?

Growth potential is not defined by laws of nature, alone or even largely. Growth potential is defined significantly by social and economic policy choice and by political will. From this perspective, there is no inevitability that the advanced economies of Europe, North America and Japan (the old G7) should be beset by long term secular stagnation. There are levers of macroeconomic policy that can be activated to lift effective demand; there are structural reforms that can unleash investment and productivity potential. Negative trends in these variables have more to do with policy failure than with chronic propensities to over-save or under-invest. In emerging economies, the hard choices are about the round of structural reforms that are needed to navigate the ‘middle-income trap’.

In an open global economy, stronger rates of growth in the emerging economies, where returns on investment remain high, are consistent with higher net exports and capital flows from the industrial world to emerging economies on a mutually reinforcing path to higher global growth. More expansionary policies and weaker exchange rates in advanced economies are a corollary part of the mix to bring global growth closer to 5 than 3 per cent. These positive, mutually reinforcing trends will not be entrenched without international policy collaboration.

That’s why the G20 focus on frameworks conducive to mobilising resources for infrastructure investment was the natural complement to its growth agenda.

Inclusion of the Asian and other emerging economies in the G20 group is a major step forward. They deliver regional, cultural and institutional diversity as well as new economic power to the high table. Agreement may be more difficult, debates more intense, and disagreements out in the open. In global negotiations, though, it is more important to be talking to those with whom reaching some kind of agreement may be difficult, rather than just with those among whom there is agreement to begin with. Trying to exclude Russia from the Brisbane summit would have been very costly and risked breaking the G20 apart. The Australian chair’s stumble in trying to do that has actually added to the G20’s resilience.

The main challenge for the G20 now is to create sustainable world growth based on real investment that stimulates productivity gains and provides new, long-term jobs in the value-added chains of the products and services of the future across advanced and emerging economies alike. Laying the foundations for sustained global growth through productivity-enhancing reforms within the framework of a global income target is a plausible strategy for achieving this so long as it does not end in Brisbane.

On the corollary objective of broadening participation in the established institutions of global governance, and ensuring that key global economic institutions are robust and able to withstand unexpected shocks if and when they occur, progress remains patchy. The IMF awaits US reponse to its need for governance reform. It is good that leaders have put the health of the WTO, which underpins the world trading system, onto the agenda. And at least dealing with climate change is also now out there.

The scale and structure of the global economy has changed dramatically since the post war institutions were put in place. The nature of international commerce and international capital movements and the presence of large new players like China, India, Indonesia and Brazil mean that the old rules need upgrading or extending and new issues need to be addressed. Turkey, the next chair, will take up the issue of the global trade regime and China, the host for 2016, is likely to maintain the momentum on this, growth and climate change.

Again, ironically, the Australian chair’s failure to completely low key the issue of climate change — because of its importance to the United States, China and Europe — was an important mark of the summit’s success.

Peter Drysdale is Editor of the East Asia Forum.

Categories: Forum

Who calls the shots on Australia’s foreign policy?

East Asia Forum - Sat, 11/15/2014 - 16:00

Author: Kerry Brown, University of Sydney

On hearing that Australian Prime Minister Tony Abbott pulled away from involvement in the Chinese development bank because of US pressure, a cynical observer might assume that Canberra’s policy towards China is signed off in Washington. Hardened Chinese diplomats may well tell President Xi Jinping that if he wants any decisions about Australian foreign policy towards China he might as well cut out the middle man and talk directly to the State Department in the US.

It is perceptions like these that Abbott has the chance of a political lifetime to dispel when he has two bites of the cherry in November when Xi arrives in Australia for both the G20 and a state visit. If Abbott cannot rise to the occasion and at least assert that he — and he alone — is in charge of Australia’s bilateral relationship with China then the cynics will be able to claim their world view is right.

Free Trade Agreements are the easiest thing for people to understand and see self-interested benefits in. But this is not about FTAs. It is about the way that Abbott speaks about Australia’s relationship with its largest trading partner and a country becoming increasingly dominant in the region. If he can move beyond the platitudes of ‘win-win’ and articulate a joint vision of development, partnership and sustainability — that carries conviction in Australia and engages the Chinese — then he will have achieved more than his most recent predecessors. They were either hopelessly ambiguous, like Kevin Rudd, or tepid, like Julia Gillard. Abbott is starting from a low base, but he has to do better than this.

At the moment, the Australia–China relationship is like a novel without a plot. It meanders along, veering dangerously close to complacency, before sending the reader to sleep. In so many areas the relationship could be better. Australia’s strengths — as an innovator, a creative economy, a finance centre, and a partner in environment and sustainability challenges — should be better understood in China. Xi Jinping has an evident affection for the country. He has visited every state except Tasmania and will rectify this during his November visit. This should translate into real benefits for Australia. How many other countries have this sort of appeal to the dominant leader of the world’s second largest economy?

It is immensely challenging for Australia to articulate a unilateral policy towards China without receiving a late night call from Washington. Yet perhaps Abbott can take inspiration from two great examples as he navigates the next few weeks.

The first is the late Gough Whitlam whose vision on China still resonates today. Whitlam intuitively read the changed circumstances of the early 1970s — before public news of the US rapprochement with China — and beat his own path to Beijing as opposition leader. Whitlam’s instincts proved right and are still paying dividends four decades later. All of this without any real negative consequences from the US. If Whitlam could square the US–China circle in tougher times, Abbott should aspire to now.

The second figure is no less than Deng Xiaoping. Applying the ideas of the China’s former leader to Australia, Abbott needs to convey his vision of a nation that understands the intimate links between economic development and being a powerful modern state. A stronger Australian economy is a stronger Australia, period. And only a strong Australia in this space will be able to prosper and develop on all other fronts in the coming decades. Abbott and his colleagues speak of Australian values and principles and the need to stand by these. That is right. But the smartest tactic would be for Australia to exemplify these values by strengthening its economy through its confident relationship with China. Then it would truly be in a position to preach and be listened to.

Kerry Brown is Executive Director of the China Studies Centre and Professor of Chinese Politics at the University of Sydney, Associate Fellow at Chatham House, London, and the author of ‘The New Emperors: Power and the Princelings in China’.

Categories: Forum

After a big year for APEC, what next?

East Asia Forum - Sat, 11/15/2014 - 04:00

Author: Yuen Pau Woo, Asia Pacific Foundation of Canada

The APEC summit has only just ended, but like the return of hazy skies over Beijing, clouds of uncertainty surrounding the regional forum have again drifted overhead. This is familiar weather for APEC, a grouping that has faced questions about its future for well over a decade. On the face of it, China’s year of hosting APEC has given a level of attention to the regional grouping that should stand it in good stead for the foreseeable future. But if in years to come we look back to identify the year that APEC peaked, perhaps 2014 is that year.

By any measure, the ambition and import of the announcements made at this year’s Summit were major: a US$40 billion infrastructure fund for South and Central Asia, the creation of a new development finance institution, a cooling of tensions between China and Japan over the Senkaku/Diaoyu Islands, US–China agreement on the reduction of carbon emissions, and pursuit of a Free Trade Area for the Asia Pacific (FTAAP). Of these, only FTAAP counts as an APEC initiative. The other announcements (and many more between pairs of APEC members using Beijing as a platform) are bilateral or regional agreements that are not strictly part of the APEC agenda.

The practice of using the APEC as a venue for making non-APEC specific announcements is a well-tested tradition at the annual leaders’ meeting. In the 1990s and the early part of the last decade, one could count on some subset of APEC members to brag about the conclusion of yet another preferential trade agreement, even as the membership as a whole would plead ardently for success in multilateral trade negotiations.

Which is why FTAAP is the least important of the announcements made by China, even if this idea is the one that is most quintessentially APEC. For all the good intentions of harmonising various existing and proposed FTAs in the region so that they can come together as a mega-regional FTAAP, no serious effort will be put into ‘harmonisation’ before the component parts are first assembled. And by that time, the vested interests that will have formed will resist a mega-regional deal.

A more significant development that came out of Beijing is the increased focus on infrastructure development, in particular progress on an Asian Infrastructure Investment Bank (AIIB). When President Xi floated this idea at last year’s APEC summit in Bali, many doubted the seriousness or feasibility of his proposal. While the AIIB still has many obstacles to overcome before it is a functioning entity (not least the opposition of the United States and Japan, as well as the incumbent Asian Development Bank in Manila), there can be little doubt now that it will come to fruition.

The emphasis on infrastructure marks a departure from the traditional APEC focus on trade and investment liberalisation. For many years, the APEC forum has had a dialogue on infrastructure issues — for example in identifying investment projects or on the structuring of private-public partnerships — but it has always skirted the core question of financing for the massive infrastructure needs of the region, usually punting the question to the ADB and other multilateral development banks.

By creating the AIIB, China has on the one hand provided a direction for APEC’s infrastructure agenda and on the other hand shifted attention away from APEC to the new institution. After all, many of the economies where these infrastructure investments are most needed are not even APEC members. Indeed, China made a point of having leaders from Cambodia, Bangladesh, Pakistan, Laos, Mongolia, Myanmar, and Tajikistan (all non-members of APEC) in Beijing on the eve of the Summit to announce its $40 billion infrastructure investment plan.

The Beijing Summit has underscored the central role of China in the regional forum, and shone an uncomfortable light on the lack of leadership and vision provided by other APEC hosts, and by the institution as a whole.  Not all APEC members will buy into Beijing’s liberalisation cum infrastructure investment agenda (described by President Xi as a shared “Asia Pacific Dream”)  but many parts of the region (including non-APEC members) will gladly sign on.  China will in many ways be doing the work of APEC, even if APEC will not be able or willing to own it.

APEC could muddle on indefinitely, with each host going through the motions of a work program for the institution as a whole that is routinely trumped by China-led, bilateral, or plurilateral initiatives that have no real APEC pedigree. Perhaps the leaders of APEC, especially the big players, will want to preserve the Summit format as the opportunity for a guaranteed meeting amongst themselves, and as a platform for announcing their own pet projects. Set against this, however, is the reality of an increasingly crowded calendar of leaders’ meetings — many with overlapping participants. The G20 meeting in Brisbane next week will be a test both of the leaders’ travel stamina and of their creativity in producing a fresh set of results.

On the eve of the Beijing Summit, the Pacific Economic Cooperation Council released its annual State of the Region survey of opinion leaders in the Asia Pacific, reporting the highest level of positive impressions of APEC since the survey was started in 2007. 61 percent of respondents had a positive view of APEC, compared to only 35 percent last year. It would be tempting to conclude from this that, at age 25, APEC has finally hit its stride.

But the reality is that APEC 2014 was important because China was the host, and that the lustre will fade as the Philippines takes over as chair. When asked to identify the biggest risk to growth, respondents in the PECC survey overwhelmingly chose ‘A slowdown in the Chinese economy’. The region may not share China’s dream, but it will have to learn to live with it.

Yuen Pau Woo is Distinguished East Asia Fellow at the Asia Pacific Foundation of Canada.

Categories: Forum

How can Southeast Asia increase its preparedness for an Ebola outbreak?

East Asia Forum - Fri, 11/14/2014 - 16:00

Authors: Mishal Khan, Andrew Lover and Richard Coker, NUS

Southeast Asia is no stranger to epidemics and is a hotspot for emerging disease threats. There have been serious economic and health-sector impacts from zoonoses including Nipah virus infections, SARS and highly pathogenic avian influenza (commonly known as bird flu). While these events catalysed some change in infectious disease policies within the region, many countries’ interest has since waned. Many governments, faced with numerous other pressing health priorities, have classified the threat of other emergencies as remote.

But the recent emergence of Ebola Virus Disease (EVD) in West Africa has laid bare fragilities within international health responses on a global scale, even in countries — such as the US and Spain — where it was previously unthinkable that secondary transmission could occur within health facilities.

A new framework is necessary to assess the risk of an EVD outbreak occurring within a country if a case crosses its borders, and to act as a guide on how to increase country-level preparedness. The framework, which builds on a rapid assessment toolkit for communicable diseases, is designed to highlight that the effectiveness of a country’s response to an outbreak is dependent on a combination of broad (horizontal) factors related to the political environment, health system and local population, as well as on targeted disease-specific (vertical) measures to prevent the disease from spreading.

Figure. Proposed framework for Ebola Virus Disease preparedness.

The current effectiveness of the health system depends on its capacity to serve the population, including hard-to-reach groups, as well its capacity (in terms of human resources, information systems and laboratories for example) to respond appropriately to a sudden increase in workload.

When formulating general policies for EVD control, local traditions and beliefs about death and disease are often overlooked. There are important variations in religion and culture across countries and within countries in the region. Practices related to burial or cremation, washing of bodies, storage of bodies and community handling of severely ill individuals influences the potential for the spread of EVD. There has previously been a well-founded call to understand and benefit from religious teachings to help curtail transmission in Muslim-majority African countries. Specifically, the use of Islamic guidance on avoiding travel to epidemic-affected regions, and suspending traditions around washing corpses before burial, could help limit the spread of Ebola. Such approaches can and should be applied in Asia, where appropriate and feasible.

Similarly, the level of trust between public institutions and the population is an important determinant of how effective screening, contact-tracing and isolation of high-risk individuals may work in a specific countries and communities. Communities or regions in which the reach of the formal health system and institutional trust is low will be at an inherently higher risk of an outbreak as control measures are likely to be implemented slower and less effectively.

In the case of EBV, the formation of a high-level preparedness committee is essential in all countries. This committee, whose mandate should include setting policies and protocols at the national level, should include a broad set of actors with expertise in medicine, public health, transport and mass media.

Also, countries should form a complementary and specially trained medical response team that is on call around the clock to attend to the first reported cases or any high-risk suspects. This team should be comprised of doctors, nurses and laboratory technicians who, as well as being trained to respond, are aware of the risks they are taking on in handling potential Ebola-infected cases.

The risk of transmission to healthcare workers is substantial even with high levels of personal protective equipment. And it will be even higher when necessary infection control measures are not in place owing to general weaknesses in the health system. To date more than 400 healthcare workers have been infected in West Africa and over half of these have died. This tragedy should not be repeated in other resource-limited settings.

Even if this framework was implemented, the process is not without challenges. Preparedness assessments require input from a broad range of technical experts. And countries that are likely to be least prepared are also least likely to have preparedness committees in place to raise alarms and ask for assistance. Preparedness is unlikely to be uniform across a country; it may vary due to health system strength, differences in cultural practices, transport links and other local dynamics. Steps to improve preparedness must also strike a delicate balance between information sharing for preparedness and creating panic.

Looking forward, there should be concrete planning at the regional level, to assist country-level committees. Also, real, transparent dialogue is desperately needed to determine what the global and regional public health community’s role should be in supporting countries with limited capacity for comprehensive surge or preparedness plans. From a regional institutional perspective, these discussions need to ask whether ASEAN has a role and what the World Health Organisation’s regional and country offices’ roles are in supporting preparedness. The Ebola Virus Disease outbreak raises serious questions about the effectiveness of international health regulations.

Mishal Khan is Visiting Senior Research Fellow at the Saw Swee Hock School of Public Health, National University of Singapore and a Lecturer at the London School of Hygiene and Tropical Medicine.

Andrew Lover is an epidemiologist at the Centre for Infectious Disease Epidemiology and Research at the Saw Swee Hock School of Public Health, National University of Singapore.

Richard Coker is Visiting Professor at the Saw Swee Hock School of Public Health, National University of Singapore and Professor of Public Health at the London School of Hygiene and Tropical Medicine.

Categories: Forum

India ready to tackle a QE-less future

East Asia Forum - Fri, 11/14/2014 - 04:00

Author: Ashima Goyal, IGIDR

India was one of the hardest hit of the emerging markets after the US Federal Reserve first hinted it would cut back its quantitative easing program in May 2013. There were three reasons for this. First, global markets over-reacted. Second, India had many macroeconomic weaknesses. Third, since its capital markets were deep and liquid enough, they offered an avenue for portfolio managers targeting reduced exposure to emerging markets.

But since this blow, there have been corrections in all three areas. So the final withdrawal of US quantitative easing (QE), which the US Federal Reserve announced at the end of October, will not have a similar effect on the Indian economy.

Part of this is that, while the initial announcement took markets by surprise, they now factor in the withdrawal of QE and have adjusted their portfolios. This time around, the US Federal Reserve was more careful in signalling change and preparing markets. Markets did not over-react. Moreover, the European Central Bank and the Bank of Japan (BOJ) will continue to pump liquidity into world markets, which will allow for a more gradual market adjustment.

But, more importantly, the Indian economy is much stronger now than it was before talks of tapering. Inflation has fallen, growth has bottomed out, and the current account and fiscal deficit have reduced. Political stability and the new government’s focus on strengthening governance and relieving domestic bottlenecks improve India’s future prospects.

And while markets remain open and liquid, foreign investment in Indian debt markets, which will be the most affected, is capped in India. Over the last year, India did raise the ceiling for investment in Indian debt. But equity flows still dominate and they normally distinguish between emerging markets. Among the BRICS, India is poised to benefit most from the softening commodity prices.

This fall in commodity prices is likely to continue. QE, which consciously sought to drive up asset prices, also drove up oil prices. But that rise brought about a permanent rise in supply and weakened OPEC’s power to fix prices. Chinese demand has also slowed, but that is not the primary reason for the fall. 2012, saw the first steep fall in Chinese growth to 7.7 per cent from 9.3 per cent the previous year, but oil prices did not soften.

India introduced a range of measures after the tapering talk in 2013. Indian policymakers can use that experience to select short-term measures to brace against any impact of the US Federal Reserve ending its QE program.

The measures clearly demonstrated the effectiveness of building up reserves and using them in targeted intervention. A prime benefit of equity inflows is that they are risk-sharing. General intervention would reduce this as it would give a better currency value to departing short-term capital. Moreover, it may make too much of a draft on reserves. Oil swaps, however, proved effective in taking concentrated dollar demand from domestic oil-importing firms off the market. This smoothed the volatile dollar demand.

Defending the rupee with interest rate changes and market restrictions proved to be less useful.

In addition to improving longer-term economic fundamentals, Indian policymakers acted on these lessons. They built up reserves augmented by a swap line with the BOJ. There is regular intervention to reduce rupee volatility, while the real effective exchange rate has not been allowed to appreciate too much in the face of large inflows.

One negative is that larger Indian interest differentials have attracted more investment into Indian debt over the last year. Differentials were high because policy was in inflation fighting mode. The saving grace is that the debt inflows continue to be capped.

Another consequence of higher domestic interest rates, especially since the rupee has stabilised, is firms have been borrowing abroad at lower rates without hedging their exposure.. But again, these borrowings are capped.

If outflows come following the QE withdrawal, the Reserve Bank of India is well set to respond with a combination of measures including moderately depreciating the rupee. But they should not raise interest rates or reimpose market restrictions that are being gradually lifted.

India is better equipped to weather the end of quantitative easing now than it was back in May 2013. Indian policymakers should look to the past to be ready for a future without quantitative easing.

Ashima Goyal is Professor of Economics at the Indira Gandhi Institute for Development Research.

Categories: Forum

Najib’s East Malaysia challenge

East Asia Forum - Thu, 11/13/2014 - 16:00

Author: Arnold Puyok, UNIMAS

Malaysia’s federal government needs to rethink its strategy on regional autonomy in the states of Sabah and Sarawak if it wants to maintain their electoral support. Sabah and Sarawak helped seal the ruling Barisan Nasional (BN) victory in the 12th and 13th general elections. But there are growing concerns in the two states about the intrusion of the federal government.

Discontent in Sabah and Sarawak stems from the perceived dominance of the federal government and erosion of state rights.

Unlike during former prime minister Mahathir’s regime, Najib has allowed open discussions on regional autonomy. The new chief minister of Sarawak, Adenan Satem, has, on occasion, taken a jab at the federal government and reminded federal leaders not to interfere in state matters. But his counterpart in Sabah, Musa Aman, has taken a non-confrontational approach. Sabah learnt the bitter lessons of going against the federal government under the Mahathir regime. Musa cannot afford for Sabah to take the same path again, even under the more open and democratic Najib.

But the issue of autonomy is not as straightforward as it seems. Most people in Sabah and Sarawak think that autonomy means total independence from the federal government. Despite enjoying greater autonomy than other states in the federation, Malaysia’s federal structure is still too centralised for Sabah and Sarawak.

Further, the people of Sabah and Sarawak, especially the indigenous communities, allege that UMNO (United Malays National Organisation) — the largest party in the BN coalition — plans to ‘Malay-ise’ and ‘Islamise’ them. Indigenous Dayak leaders have spoken out against peninsular-based right-wing Malay groups. But the problems in federal–state relations are not driven by ethno-religious issues alone: there are systemic and structural problems concerning how powers are divided between federal and state governments. Power is centralised in Malaysia’s federal system, leaving the states with little choice but to prioritise federal needs. This has deepened the animosity between federal and state governments.

Since 2008, Najib has tried to address this anomaly. He has increased the federal allocation of funds to the states and created a new national holiday to celebrate the unification of Sabah, Sarawak and Peninsular Malaysia. The large Christian population in East Malaysia have also celebrated Najib’s concession to allow them to use ‘Allah’ to refer to their God — a right recently restricted to Muslims in Malaysia. This was part of a bigger 10-point-solution announced by Najib to provide greater religious freedoms in the two eastern states.

Najib also put his political career on the line by agreeing to set up the Royal Commission of Inquiry to investigate the presence of illegal immigrants in Sabah. It was a risky move considering many of his party’s leaders had been implicated in the inquiry for issuing fake Malaysian identification cards to foreigners.

Yet even with this Inquiry, Sabah and Sarawak have gone further, requesting a ‘review’ of the Malaysia Agreement that was formulated before the creation of Malaysia, parts of which formed the basis of the Malaysian constitution. This review would be aimed at rectifying the centralist tendencies of Malaysian federalism.

But a formal review would be a regressive move. What the Najib administration should do is form a high-level bipartisan committee to review autonomy for Sabah and Sarawak within the context of the Federal Constitution. It is the constitutional safeguards for East Malaysia that should be reviewed, not the Malaysia Agreement. While giving greater autonomy for Sabah and Sarawak may be necessary to sustain the federation, it is also important to specify and justify the details of any concessions. It is important that Najib does not succumb to the pressure of local elites who pretend to champion state rights. It is ordinary East Malaysians who should benefit more from autonomy and not self-serving politicians.

Compared to his predecessor Mahathir, Najib is perceived more positively in East Malaysia. But the expectations of people in Sabah and Sarawak are high. They want practical solutions rather than empty rhetoric. Najib is fortunate to have the support of voters from East Malaysia who have gradually lost hope in the opposition. And he still has the time to prove that he has the best solution for Sabah and Sarawak.

Dr Arnold Puyok is Senior Lecturer at the Faculty of Social Sciences, Universiti Malaysia Sarawak.

Categories: Forum

Myanmar’s militant monks smash stereotypes

East Asia Forum - Thu, 11/13/2014 - 04:00

Author: David I. Steinberg, Georgetown University

In recent months, Buddhist monks have led riots against Muslim communities in various parts of Myanmar. Undocumented charges of attempted conversions of Buddhist women by Muslim men, and the perceived expansion of the Muslim population, have exacerbated concerns, at times leading to violence. Myanmar is regarded as a quintessential Buddhist state, as almost 90 per cent of its population are Buddhists, including virtually all of the ethnic Burman (Bamah) majority. Buddhism’s ubiquity, except among some peripheral ethnic groups, gives it special status in the state. Does this serve as an explanation for why Buddhist monks, who enjoy privileged prestige and status, have become militant — some violent — in their expression of support for legislation limiting conversions and advocating restrictions on the size of Muslim families?

Burmese history helps explain an important, almost pervasive, sense of vulnerability in Myanmar and could account for this militant stance. This perceived vulnerability was instigated through the loss of independence and the gradual dismemberment of Burma’s kingdom by the British in the 19th century, their effective disestablishment of Buddhism, and the ceding of economic control to the British, Indians and Chinese. The perception of a fragile culture threatened by foreigners has led to vehement outbursts of anti-Muslim and nationalist sentiment, previously promulgated by the state-controlled media but in freer times often led by monks, with whom no one can publicly disagree. In the past the targets were the former imperialists (the West), then the Chinese, now the Muslims, and perhaps in the future the West (especially the United States) as tourists, businessmen, aid workers and pop culture are seen to be decimating traditional Burman values and culture. Monks have formed a group called ‘The Organization for the Protection of Race and Religion’, a clear indication of what some of them regard as an existential threat.

This sense of vulnerability is not limited to Myanmar, but may be an unintended consequence of the shame of the colonial past as experienced in now-independent states. In Myanmar however, monks were martyrs in the independence movement against the British, leading riots against Muslims during that era, their special status giving them credibility among the general Burman population. Despite this, some of their arguments are unfounded and emotional: India — the origin of Buddhism — is no longer Buddhist because Muslims eliminated it; Muslim men receive money for converting Buddhist women; Muslim families have more children and will eventually take over the state.

Implicit in these assumptions are degrading comments on the intelligence and freedom of Burmese women — assumptions that most foreigners familiar with Burmese society would deny. Historically, women’s rights in Myanmar have been more advanced than of those in many Western countries. The focus on Burman women as vulnerable to foreign machinations is important, and has been a theme evoked since the colonial period. This sense of female betrayal of Burman cultural values has even been levelled against Aung San Suu Kyi for marrying a British national.

With political legitimacy in Myanmar being intimately associated with Buddhism, few leaders or politicians are willing to challenge publicly the sermons of monks, for to do so would make them subject to popular condemnation. Political persuasion has little to do with these attitudes. Fighters against the authoritarian government in Myanmar have expressed anti-Muslim views. Aung San Suu Kyi, the world avatar for democracy and rights, has not said anything against these excesses.

This perceived cultural fragility seems contrary to what many foreigners believe is a strong and vibrant Burman culture and tradition that has been better preserved there than those in any other state in the region. It may well be, however, that these concerns indicate a more profound and general sense of the need for state control that pervades fields far beyond religion. This includes a government that rigidly controls its economy, centralised control of education, and the monitoring of foreign aid and foreign organisations.

The Western schoolbook approach which views textual Buddhism as pacifistic, meditative and non-violent misses the dynamic of Buddhism in Myanmar as a socio-political force. It is as naive as interpreting the history of Western Europe on the basis of the Sermon on the Mount.

David I. Steinberg is Distinguished Professor of Asian Studies Emeritus, Georgetown University, and Visiting Scholar, Johns Hopkins University’s School of Advanced International Studies.

Categories: Forum

Three keys to unlocking Cambodia’s growth

East Asia Forum - Wed, 11/12/2014 - 16:00

Author: Heng Pheakdey, Enrich Institute

After the global recession in 2009, Cambodia’s economy recovered steadily with its GDP growing at an average rate of 7 per cent per year in 2010–13. It is expected to maintain its growth rate of 7 per cent this year.

But despite these rosy short-term prospects, Cambodia’s long-term growth prospects might be hampered by its low competitiveness. It has persistently underperformed in the World Economic Forum’s Global Competitiveness Index. In 2014, Cambodia ranked 95 out of 144 countries, down from 88 in 2013. Weak institutions, poor infrastructure, low-quality higher education and training, and lack of innovation inhibit Cambodia’s overall competitiveness. Apart from Myanmar, Cambodia was the lowest ranked country in the region. Singapore, Malaysia, Thailand and Indonesia were all in the top 5.

Corruption and weak institutions hold Cambodia back from becoming truly competitive. Cambodia remains one of the most corrupt countries in the world. Despite adopting the Anti-Corruption Law in 2010, corruption is still widespread in Cambodia. Corruption weakens the judiciary, the police force and other state institutions. Favouritism by government officials and impunity is commonplace. The lack of a clear distinction between the courts and the executive branch of government has also led to deep politicisation of the judicial system.

The lack of infrastructure is one of the biggest challenges for Cambodia’s growth and overall competitiveness. Cambodia’s infrastructure is less developed than its neighbouring countries. Only half of its 2-digit national roads and only 15 per cent of provincial roads are paved. The railway system is underdeveloped and under-utilised. Only 6 per cent of the population uses the internet, and access to electricity is still limited and expensive.

Cambodia also underperforms in delivering high-quality higher education and training. While the enrolment rate has increased, the sector is still plagued with numerous challenges. Most universities lack learning and teaching resources and facilities, and qualified academic staff are in short supply. Higher education programs are largely driven by commercial interests, focusing on a few business-related courses; while mathematics and science subjects are lacking. Soft skills training is missing and research activity is limited.

Perhaps the biggest challenge Cambodia faces is the lack of innovation. Cambodia’s ability to innovate is just a little above that of Myanmar’s but below the rest of its neighbours’. The main barriers are the lack of quality scientific research institutions, the limited number of scientists and engineers, the lack of resources dedicated to research and development, and insufficient collaboration between industries and universities for research and development activities.

The lack of competitiveness could be a larger problem when Cambodia faces off against its neighbours following the ASEAN economic integration. Unless Cambodia enacts comprehensive, effective and timely polices to improve its competitiveness, it will lose the competition, affecting its long-term development. There are three keys to unlocking Cambodia’s growth.

First, Cambodia should take action to ensure that state institutions function effectively. The government’s anti-corruption strategies and agencies need to be strengthened to minimise rent-seeking and nepotism. The judicial system should be made fully independent to conduct objective evaluation and application of the law.

Second, Cambodia needs to invest in key infrastructure such as roads, railways, energy supplies and internet access. It needs to rehabilitate high-priority road networks and bridges to facilitate the growth of agriculture, tourism and trade in rural areas. Cambodia’s existing infrastructure around its ports and airports should be efficient enough to handle forthcoming increases in production and trade.

Third, Cambodia needs to improve the quality of its higher education. Higher education plays a vital role in building up a competitive workforce for Cambodia. Improving  the quality of higher education would ensure that Cambodia meets its current and future human capital needs, and allow Cambodia to benefit from the ASEAN integration in 2015. Cambodia needs financial resources to improve education infrastructure, update the curriculum and teaching methods, and recruit well-qualified teaching staff. Research should also be promoted, and internal quality assurance should be the top agenda for all higher education institutions.

Strengthening institutions, modernising infrastructure and enhancing the quality of education would contribute to improving innovation and Cambodia’s overall competitiveness. More needs to be done to create an enabling environment to support innovators. For example, Cambodia should enact policies to stimulate technological development and promote collaboration in research and development activities. Cambodia must make an effort to remove bureaucratic and regulatory obstacles to entrepreneurial activities, which can stifle innovation.

Cambodia has come a long way in terms of growth and poverty reduction. Now it’s time for the country to focus on improving its competitiveness to sustain long-term economic and social development. If Cambodia gets this right, it would be on track to fully integrate itself into the region and the world.

Heng Pheakdey is the founder of Enrich Institute, a Phnom Penh-based human resource development organisation

 

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